Question

On 12/31/13, Heaton Industries Inc. reported retained earnings of$525,000 on its balance sheet, and it reported that it had $172,500 of net income during the year. On its previous balance sheet, at 12/31/12, the company had reported $555,000 of retained earnings. No shares were repurchased during 2013. How much in dividends did Heaton pay during 2013? Select the correct answer. a. $202,652 b. $202,424 c. $202,728 d. $202,576 e. $202,500

Answer 1

Answer:

The correct answe is e. $202,500.

Explanation:

Retain earning is the portion of company earning than is retain out of company net income. In other words it is the amount retain for re-investment and not paid out as dividend to stock holders.

The amount of dividend to be paid can be calculated using following accounting equation.

Opening balance + net income (for the year) = closing balance + dividend

555,000 + 172,500 = 525,000 + dividend

Dividend = $ 202,500